Industry News by Nemesis

De Beers CEO Hints at Sight Changes, Continued Flexibility in 2016

January 24, 2016

De Beers will “continue to focus on being flexible” in its sightholder sales after offering measures including deferrals of goods at contract sales last year.

The miner let buyers defer allocations at its November sight to December or bring the following month’s supply forward, and continued offering this flexibility at the December sale, instead of holding purchasers to their original applications for rough – or intensions to offer (ITOs). The measures came amid a slump in rough demand and smalls sights valuing an estimated $70 million in November and about $180 million in December.

De Beers chief executive officer Philippe Mellier hinted the company would continue to be flexible in applying its supply rules.

“While the actions we took last year in response to lower levels of demand mean that we will have a smaller level of forecast availability for the 2016 to 2017 period, we will continue to focus on being flexible and attempting to meet your needs if demand conditions change,” Mellier told sightholders at Gaborone in Botswana January 20 at the first sight of the year.

“Should your requirements for rough increase as we head into the second half of the year, you will still have the opportunity to increase your share of our availability through mechanisms such as ex-plan allocations, additional requests and purchases from our auction-sales events,” Mellier said.

It is not yet clear how much flexibility De Beers offered in its January sight. The company cut prices by as much as 7 percent, Bloomberg reported January 19, citing sources who asked not to be identified. The rough supplier was planning to offer $450 million of diamonds for sale, the report added, citing one anonymous source.

Mellier said he has seen polished diamond prices start to stabilise and even increase in certain areas. “We have seen some encouraging – not magnificent, but definitely encouraging – early indications from holiday season sales in the US consumer market. And we have seen greater trading activity than at the end of 2015.”

After such a difficult year, he pointed out, there are some reasons to be cautiously optimistic as 2016 begins, and “we may be starting to recover some of the lost momentum,” the CEO said.

De Beers is looking at refining its sightholder-sales operating model and creating new teams within the organization to improve agility and responsiveness, he added.

"We will continue on the journey we have started with the current supply contract but, given the expected volatility of the world in which we will operate, we will restructure global sightholder sales so we can sharpen our focus on customer relationships and on product and service delivery," Mellier said. "This will improve our responsiveness and provide all our businesses with the best insulation against those challenges that remain outside of our control."